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Yesterday, 6:28 PM| Yesterday, 6:28 PM | 4 Comments
Mon, Feb. 1, 5:57 PM
- Raymond James analyst Praveen Narra and his team reiterate their ultra-bearish view on offshore drillers such as Transocean (NYSE:RIG) and Noble Corp. (NYSE:NE), seeing little difference in crude oil prices at $30/bbl or $45/bbl since they expect oversupply to last well beyond 2017 and likely closer to the end of the decade as market consensus overestimates the amount of incremental demand that E&Ps are willing to provide.
- The RJ analysts predict floater demand will fall by ~22% Y/Y in 2016 and another 14% in 2017; the pace of stacking and scrapping is not fast enough to correct the market’s unrelenting oversupply, the firm says.
- The firm says its concerns drive EBITDA estimates for 2016 and 2017 a respective 7% and 35% below consensus, but more importantly, it expects investors will become increasingly concerned and focused on balance sheets and debt maturities as the drilling downturn lengthens.
- RJ cuts its price target on Rowan (NYSE:RDC) to $15 from $25 to "reflect the realities of a prolonged downturn, including dayrate pressures and low contract levels," and downgrades Ocean Rig (NASDAQ:ORIG) and Pacific Drilling (NYSE:PACD) to Underperform from Market Perform on concerns about their capital positions and ability to access the capital markets.
Dec. 4, 2015, 3:49 PM
- Barclays sees little reason for optimism among offshore drilling contractors despite recent outperformance, particularly in light of recent guidance from major oil companies for dramatically reduced offshore spending in 2016; the firm expects another leg down in stock performance as a lack of contracting activity and a massive oversupply of floaters looks daunting in light of the spending cuts.
- Nevertheless, Barclays upgrades Atwood Oceanics (ATW -5.8%) to Equal Weight from Underweight with an $18 price target, and now considers the stock fully valued after dropping ~23% over the past three months; the firm sees the most downside to Transocean (RIG -3.4%), Diamond Offshore (DO -3.5%) and Noble Corp. (NE -4.6%), while Pacific Drilling (PACD -5.6%) and Ocean Rig UDW (ORIG -4.1%) show the most upside but also come with the most risk with little equity remaining and looming liquidity issues.
Nov. 30, 2015, 2:23 PM
- The "lower for longer" consensus on crude oil prices is overly conservative, and prices will begin bouncing back next year, Guggenheim analysts say as they upgrade the oil services sector to Buy and see plenty of upside for the major players given current market conditions.
- Guggenheim is calling for oil prices to return to $100/bbl by 2018, and sees 10% upside across the board for oil services stocks in the next year resulting from the group's unique exposure to crude prices.
- Within the group, the firm prefers Rowan (RDC +1.8%) and Atwood Oceanics (ATW +1.6%), as their backlogs should help reduce near-term risk, RDC has no newbuild commitments and ATW is finalizing a contract in Brazil for one of its two uncontracted rigs, utilization in the Middle East (NYSE:RDC) and Australia (NYSE:ATW) should be resilient on a relative basis, and both have fleets that make them more interesting M&A candidates.
- Upgraded to Buy from Neutral: CAM, RIG, NE, OII, PACD, DO, ESV, CLB, OIS, HP, NBR, CRR, NOV, DRQ, FI, PTEN, SSE, FTI, CJES, FET, SPN.
Nov. 8, 2015, 10:37 PM
- Pacific Drilling (NYSE:PACD): Q3 EPS of $0.19 misses by $0.02.
- Revenue of $260.17M (-7.0% Y/Y) misses by $11.23M.
Nov. 8, 2015, 5:30 PM
Oct. 29, 2015, 3:44 PM
- Pacific Drilling (PACD +11.2%) is sharply higher after announcing it had terminated a construction contract with Samsung Heavy Industries for a newbuild deepwater drillship.
- PACD says Samsung failed to deliver the Pacific Zonda drillship on schedule and will seek a refund after already making ~$181M in advance payments to the South Korean shipbuilder.
- The cancellation comes in the same week that Statoil blamed the delay on the start of its Mariner project in the North Sea on delays on topside delivery at the Daewoo ship yard in South Korea.
Oct. 20, 2015, 7:17 PM
- A worker died today in an accident on an offshore drilling rig in the Gulf of Mexico, and federal regulators say they are investigating.
- The worker was employed by Pacific Drilling (NYSE:PACD), which owns the Pacific Santa Ana drillship, which has been contracted to Chevron (NYSE:CVX) since 2012.
- The Bureau of Safety and Environmental Enforcement says the death is the first this year related to offshore drilling operations in the Gulf.
Sep. 28, 2015, 6:19 PM
- Transocean (NYSE:RIG) is upgraded to Hold from Sell at Deutsche Bank, which believes the company - with a new management team in place - is in position to take radical restructuring measures that could include re-capitalizing the balance sheet and scrapping up to 40 rigs.
- While Deustche Bank was feeling a little better about RIG, Susquehanna sticks with its Negative outlook and $11 price target even while raising its estimates for the beaten-down driller; despite RIG’s attempt to lower costs and operate under a smaller scale, the firm sees the challenging market dictating RIG's outlook for at least the next two years amid an environment of muted demand and rig oversupply.
- It was a rough day for offshore drillers: RIG -4.7%, ESV -6.3%, RDC -2.4%, DO -5.2%, ATW -5.7%, NE -4.3%, SDRL -8.9%, ORIG -6%, PACD -11.5%.
Sep. 18, 2015, 12:45 PM
Sep. 16, 2015, 12:45 PM
Sep. 3, 2015, 3:44 PM
- Credit Suisse downgrades Seadrill (SDRL -1.4%) to Underperform from Neutral with a $5 price target, cut from a previous $7, and Pacific Drilling (PACD +0.5%) to Neutral from Outperform with a $3 target, down from $4 earlier, while maintaining an Underperform rating on the overall offshore drilling sector.
- The sector "will get worse before getting better," but it will get better by 2018-19, although "the biggest question around most companies' value is what will their fleet look like for the next cycle," analyst Gregory Lewis writes.
- The firm maintains Neutral ratings on Ensco (ESV -0.1%) and Diamond Offshore (DO +2.8%), with best in class balance sheets but fleets that are likely to look a lot different next cycle; Atwood Oceanics (ATW -0.4%) also is rated Neutral.
- The firm maintains an Underperform rating on Transocean (RIG -0.8%), owing to its balance sheet and fleet mix, while keeping Outperform ratings on Rowan (RDC +0.8%) and Noble Corp. (NE +0.8%)
Aug. 26, 2015, 10:46 AM
- Transocean (RIG -3.3%) opens down but off premarket lows following news of its plans to suspend dividend payouts and book 2B Swiss francs ($2.1B) in asset impairments; other offshore drilling contractors trade mixed.
- Raymond James says RIG's move is prudent given the difficulties facing the offshore drilling market: "All in on an annual basis, the cancellation of the dividend would result in $220M in retained liquidity... We view this as prudent as [RIG] can use the cash to improve its own liquidity or work to eventually high grade its fleet."
- Cowen notes the decision comes as somewhat of a surprise, since the dividend had been approved by shareholders last May, and adds the move could be seen as an indication that the market has grown incrementally worse in just the three weeks since RIG Aug. 6 earnings call.
- Offshore peers: DO +1.2%, SDRL +2.2%, ESV +0.3%, RIGP +0.3%, RDC -0.1%, ATW -0.2%, NE -2.2%, VTG -4.3%, ORIG -1.5%, PACD flat.
Aug. 25, 2015, 11:10 AM
- Moody's places 11 offshore drilling companies under review for a downgrade, citing concerns regarding "an extremely challenging operating environment through at least 2017."
- The ratings agency expects oil prices to remain volatile and rise minimally through 2017, meaning the energy producers that hire offshore drillers will remain under pressure to keep a lid on spending.
- "Sustained weak crude oil prices and a steady supply of newbuild rigs will cause significant credit erosion as contracted backlogs, revenues and cash flows continue to fade," Moody's writes, and "fewer offshore drilling opportunities will be available, resulting in a potentially prolonged period of lower dayrates and fleet utilization."
- The companies under review are DO, ESV, NE, RDC, RIG, ATW, SDLP, ORIG, PGN, PACD and Shelf Drilling Midco.
Aug. 13, 2015, 10:30 AM
- Offshore drilling stocks could see further downside despite already falling ~30% in two months, Barclays analysts say, expecting offshore spending to decline by double digits again in 2016 as operators wait for signs of oil price stability and lower development costs before committing resources.
- The firm says floater retirements have stalled, with 38 retirements since last October but only three since June, making little headway for the 60-70 additional floater retirements the industry needs to rebalance the market.
- The firm downgrades Atwood Oceanics (ATW -7.3%) to Underweight from Equal Weight with an $18 price target from a previous $27, and maintains Underweight ratings on Diamond Offshore (DO -3.7%), Noble Corp. (NE -6.7%) and Ocean Rig UDW (ORIG -6.2%); Ensco (ESV -5.2%), Pacific Drilling (PACD -5.2%) and Rowan (RDC -6.3%) are maintained with Equal Weight ratings.
Aug. 10, 2015, 3:48 PM
- Raymond James analysts sayOcean Rig’s (ORIG +5%) Q2 earnings announced last Friday were impressive due to its high revenue efficiency and strong cost controls, but keep the stock rated Market Perform because of continued market weakness.
- ORIG continues to reduce its daily operating costs for active rigs, but the firm agrees with management's cautious view that it does not see any short-term market improvement coming soon.
- The firm also continues to rate Pacific Drilling (PACD +9.1%) at Market Perform, even as the offshore drilling contractor continues to post solid operational performance, with revenue efficiency again coming in near the top of guidance and lower-than-expected operating costs.
- But the PACD's outlook remains a concern, the firm says, because of anemic demand and the company’s availability, with up to four rigs with availability to start 2016 and very limited demand on the horizon.
Pacific Drilling SA is an international offshore drilling contractor committed to becoming the preferred provider of ultra-deepwater drilling services to the oil and natural gas industry through the use of high-specification rigs.
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